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1345-1346 - Simulation of Contracts

Sison bought land from Santa Fe Realty through an intermediary, Fabregas. Santa Fe Realty later refused to transfer title, claiming the sale price was undervalued. The court ruled that (1) the deeds of sale were valid as they were voluntarily executed and the parties admitted the intention was to sell the land, and (2) gross inadequacy of price alone does not invalidate a contract of sale unless there was fraud, mistake, or undue influence. As Santa Fe Realty did not prove the deeds were simulated, they stood as valid and transfer of title to Sison was affirmed.

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130 views2 pages

1345-1346 - Simulation of Contracts

Sison bought land from Santa Fe Realty through an intermediary, Fabregas. Santa Fe Realty later refused to transfer title, claiming the sale price was undervalued. The court ruled that (1) the deeds of sale were valid as they were voluntarily executed and the parties admitted the intention was to sell the land, and (2) gross inadequacy of price alone does not invalidate a contract of sale unless there was fraud, mistake, or undue influence. As Santa Fe Realty did not prove the deeds were simulated, they stood as valid and transfer of title to Sison was affirmed.

Uploaded by

Sarah Jane Usop
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We take content rights seriously. If you suspect this is your content, claim it here.
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SANTA FE REALTY V.

SISON 802 SCRA 1


1345-1346 – Simulation of Contracts

FACTS: Santa Fe Realty agreed to sell to Sison the south eastern portion of the land. On October 19, 1989, Santa Fe Realty executed a Deed
of Sale over the subject property to Fabregas for P10,918. Fabregas then executed another Deed of Sale over the in favor of Sison for the
same amount.

Sison caused the segregation of the portion of land and took possession of such and introduced improvements thereon, such as fencing the
property, fishpond and resort. However, he was not able to secure title because Santa Fe Realty refused to pay realty taxes and capital gains
tax as well as to turn over. They still refused to surrender the mother title that would help to the transfer of title in name of Sison name.

In 1991, a subdivision of the entire property and was divided into four lots. SFRI sold one of such lot titled as I-B-3-C to a certain Orosa.
However, Sison claimed that Lot I-B-3-C was the same one that was sold to him by Fabregas. Santa Fe realty stated that not same property.
They argued that Sison persuaded Fabregas and contended that they merely accommodated Sison's request to sign another set of deeds of
sale over the subject property with a reduced price of ₱10,918.00 so that the capital gains tax would be reduced. They also asserted
that Sison did not pay the consideration agreed upon for the sale of the subject property which was actually P700K.

RTC ruled in favor of Sison as owner and reconveyance. CA affirmed such ruling.

ISSUE: WON the Deed of Sale was simulated because of its alleged failure to reflect the true purchase price of the sale. [NO]

RULING:

Deed of Sale Valid as to Both Transactions


The deeds of sale were voluntarily executed, and that Santa Fe Realty and Fabregas clearly admitted that the intention was to sell the property
to Sison and were acknowledge before a notary public. There judicial admissions that the deeds of sale which were signed and executed
by them bar from denying their acts.

All the elements of contract are present. A perfected contract of absolute sale exists between SFRI and Fabregas and then Fabregas and
Sison.

There was meeting of the minds between the parties when they agreed on the sale of a determinate subject matter, which is the south eastern
portion of Lot 1-B with an area of 15,598 sq m, and the price is certain, without any condition or reservation of title on the part of the
petitioners.

Gross Inadequacy Does Not Affect the Contract of Sale


The Court, however, ruled that gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even
affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other
contract. Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue influence.

If there exists an actual consideration for transfer evidenced by the alleged act of sale, no matter how inadequate it be, the transaction
could not be a simulated sale.
Nonetheless, the fact remains that the petitioners have failed to prove that the assailed deeds of sale were simulated. The legal presumption is
in favor of the validity of contracts and the party who impugns its regularity has the burden of proving its simulation.

Since the petitioners failed to discharge the burden of proving their allegation that the deeds of sale were simulated, the
presumption of regularity and validity of the contract stands.

NOTE: Orosa was not considered buyer in good faith due to the structures erected by Sison during such time.

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